The present invention relates to an improved composite building block and a method of construction using such building blocks using a selected blend of ingredients forming a mortar matrix and an insulating element. More particularly, the present invention relates to an insulating element for use in the construction of a composite building block and in wall constructions using such building blocks. More particularly the present invention provides a building block and a wall constructed from such blocks having superior waterproofing, thermal and insulating properties due to the use of the insulating element.